2009 (10) TMI 936 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are (1) Whether the addition made under s. 56(2)(v) of the IT Act for receipt of money exceeding Rs. 25,000 without consideration is valid, and (2) Whether the year of receipt of money with regard to gift of IMD certificates should be considered when the certificates were transferred or when the money was received on maturity.

Issue 1: Addition under s. 56(2)(v) of the IT Act:
The appellant, an individual, received gifts in the form of India Millennium Deposits Certificate (IMD) in the financial year 2002-03. The certificates were capable of being transferred by way of gift. The appellant received the maturity amount on the certificate in the previous year relevant to asst. yr. 2006-07. The AO applied s. 56(2)(vi) to tax the principal amount of the IMD. However, the assessee argued that the gift was complete before the introduction of s. 56(2)(v) and (vi) and that the provisions could not be applied retroactively. The learned CIT(A) agreed, stating that the provisions could not be applied merely based on the receipt of maturity value. The Tribunal upheld the CIT(A)'s decision, emphasizing that the gift was complete before the relevant provisions came into effect.

Issue 2: Year of receipt of money for IMD certificates:
The appellant contended that the gift of IMD certificates was complete in the financial year 2002-03, and the provisions of s. 56(2)(v) and (vi) could not be applied retroactively. The Tribunal agreed with the appellant, citing the completion of the gift before the introduction of the relevant provisions. The Tribunal also referred to the decision of the Hon'ble Supreme Court in a similar case regarding the interpretation of "any sum of money," emphasizing that donations in kind were not covered under the provisions.

Conclusion:
The Tribunal confirmed the order of the learned CIT(A) and dismissed the appeal by the Revenue, stating that the provisions of s. 56(2)(v) and (vi) could not be applied to the case of the appellant as the gift was completed before the relevant provisions came into effect. The Tribunal also highlighted that the IMD scheme was instituted by an Act of Parliament and could not be affected by subsequent amendments in the IT Act.